Microsoft to ax 5,000

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In the latest sign of the deepening downturn, Microsoft on Thursday reported weaker-than-expected quarterly earnings, abandoned its previous guidance and announced its first sweeping layoffs.

Shares of the software giant and maker of the Xbox 360 video game console were in freefall for the day, closing down 11.6% at $17.14, a 52-week low.

The company moved its earnings report from the afternoon to the morning, saying it will cut up to 5,000 positions across its operations out of a work force of about 94,000 during the next 18 months.

Some observers suggested Microsoft might be financially conservative in part to keep its powder dry for a much-discussed possible Yahoo deal, but CEO Steve Ballmer during a conference call didn't get drawn into speculation.

"I've said a lot about Yahoo" and the potential advantages of a deal, he said with a laugh, adding that he knows new Yahoo CEO Carol Bartz from her days at the helm of Autodesk.

Microsoft reported an 11% decline in its fiscal second-quarter profit to $4.17 billion. Revenue climbed 2% to $16.63 billion. Both figures missed already lowered Wall Street estimates.

Microsoft's entertainment and devices unit, which includes the Xbox 360, was a rare positive. Revenue grew 3% thanks to strong holiday demand for the Xbox 360, which brought in a record 6 million unit sales in the quarter.

CFO Chris Liddell predicted further pain and reined in the firm's full-fiscal-year guidance.

"We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half relative to the previous year," he said. (partialdiff)
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